Great Stuff for training your mind to be a winner  

Posted by Book Eater

References: Price Headley articles from

A lesson every trader should take heed of is the famous Pareto's Principle: 20% of your actions create 80% of your results. Applied to trading, this means 80% of your profits will come from just 20% of your trades (while the remaining 80% of your trades will contribute only 20% of your total profits). One of the secrets to making big money as a trader is knowing when your system is no longer fitting the profile of the Top Twenty percent of your trades. To me, this means that you should not be worried about taking small losses nor should you fear unloading small profits if the price action since you put the trade on now suggests that your Top Twenty profile has now been violated.

If you have a 90% winning percentage, but your one loser out of 10 trades is 10 times your average winner, you're not going to do well. Similarly, I have seen numerous systems with low winning percentages do well, because they keep their losses small and let their winners ride, forming a very large Ratio of (Average Win/Average Loss). For example, with a winning percentage of 30%, if the size of the Average Win is five times greater than the size of the Average Loss, this system will do well.

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Consider the mind game more important once you master the primary requirements of any game.

Here the vanquished Ferrero bravely admits that the match was won or lost in the mind, and what happened on the court merely reflected which player was more mentally fit.

Great trading is "10 months grind and 2 months gravy." The secret is to minimize your losses and grind out some smaller profits for most of the year, and then be in the game for the other two months that make up the bulk of your trading profits. Trying to trade like a hero through the tough markets can lead to overtrading, which in turn can lead to many whipsaw trades, resulting in a demoralizing loss in confidence in your trading methodology.

When you feel as if your back is against the wall in trading or you psychologically feel you're losing, here's how to get yourself into a winning mindset:

1. Preparation - Guga never appeared to be hitting bad strokes even when he was losing to Russell. The disciplined approach of Guga eventually won out, but that confidence had to start with Guga knowing he could hit the winners he needed to, once he sensed the opportunity. If you're not prepared, by creating a written trading plan of your goals, and knowing specifically how your battle-tested trading method dictates your entries and exits, you give yourself no chance to confidently execute the plan. If you're flying by the seat of your pants, your emotions will take over and force you into a reactive mentality (for example, selling only after a significant decline). And a disciplined trader will consistently take money from an emotional trader 9 times out of 10.

2. Commitment
- As I watched Guga, I was amazed at how he showed a certain determination not to quit when things were not going his way. Even as he faced match point, you had a sense that he would make every shot count. I have learned in life that those who succeed in any endeavor have made a commitment to seeing it through both good times and bad. Those traders who come in to the markets expecting that the market will only provide them winning trades are setting themselves up to quit when they let small losses turn into big losses. Make sure you are committed to a successful trading plan, and then see it through even when times look bleak.

3. Execution - Once you have your plan, you have to execute. One of my biggest challenges has been pulling the trigger once I do my research, because of fear of failure. But I made my life 100 times easier when I took my analysis out of an ego-based approach (where I had to be right) to a systems-based approach (where I had to execute the system, which generated small losses but bigger gains over time). If you focus on execution, you'll take your ego out of the game and worry less about being right and concentrate more on following your system over time to mirror its results.

4. Staying Sharp - Once you start to have success, many traders start to coast. They think they have the game figured out, and now the easy money will just roll in. Such complacency can get a trader right back into another trading funk, so you have to constantly follow your plan and your process to be successful. Once Guga escaped the near-death match with Russell, he started to get ahead of his next two opponents and won the next two matches in straight sets. Make sure you stay focused on consistent success, and if you feel you've reached your trading goal, you should celebrate that day, but come back the next day with a new goal to stretch yourself and stay sharp.


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